Iraq lures US hotel chains banking on business

Iraq, after eight years of occupation by American troops, is luring US hotel operators and developers betting on growth from business expansion and an eventual pickup in leisure travel to the war-torn region.

Best Western International Inc plans two hotels under its Premier brand in Erbil, Iraq’s fourth-largest city and the capital of Iraqi Kurdistan in the northern part of the country. Marriott International Inc. expects to operate two properties in the city. Hilton Worldwide, owned by Blackstone Group, is planning a 200-room Hilton DoubleTree Suites in Erbil.

The hotel companies are following growth in Iraq by businesses including General Electric Co. and Exxon Mobil Corp. as the US prepares to withdraw its remaining troops by the end of the year. The Kurdistan region, in particular, is attractive for hospitality projects because of its relative safety and decades of neglect under Saddam Hussein’s regime, said Stephen Lari, principal at New York-based Claremont Group, which is spending $32m to develop Erbil’s Hilton DoubleTree.

“We were drawn to the region due to its stable and functioning regional government, a desire for American investment, a safe security environment, strong economic growth and an ever-more sophisticated and prosperous populace,” Lari said in an e-mail. It also has “a strong and favorable investment law, and an enormous pent-up demand for residential and hospitality development,” he said.

Demand for lodging in Iraq probably will be limited to business workers as kidnapping and terrorist violence remain concerns. The US Department of State warns Americans against all but essential travel to the country given “the dangerous security situation,” according to its website.

“Some regions within Iraq have experienced fewer violent incidents than others in recent years, in particular the Iraqi Kurdistan region,” the State Department said in a Sept 13 statement. “However, violence and threats against US citizens persist and no region should be considered safe from dangerous conditions.”

A possible lack of fresh water, electricity and communications systems also can be obstacles to doing business in the country, said Jan Freitag, senior vice president at Smith Travel Research Inc. Against this backdrop, US hoteliers may benefit from increased demand from workers seeking familiar brands, he said.

 “Western hotels are often seen as safe havens from the craziness outside their own four walls,” said Freitag, based in Hendersonville, Tennessee. “Reporters, oil workers, diplomats are willing to pay extra to sleep safely, work safely and - as importantly - eat safe food. If the hotel can deliver, then it makes sense for them to expand into high-risk areas.”

The State Department has pushed to get more US businesses into Iraq. Secretary of State Hillary Clinton has mobilized her agency to help companies like Boeing Co. and PepsiCo Inc. to compete there by focusing on building economic links, Robert Hormats, the State Department’s under secretary for Economic Affairs, said in a July interview.

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